PROJECT
IDENTIFICATION
& FEASIBILITY
ANALYSIS
Salome Maro
15TH Nov 2021
RECAP
System Development Life System Development Criteria for Selecting a
Cycle (SDLC) methodologies Methodology
Structured Design
Rapid Application Development (RAD)
Agile Development
TODAY’S TOPICS
Project Identification and Initiation
Feasibility analysis
PROJECT IDENTIFICATION
Where do project ideas come from?
A project is identified when someone in the organization
identifies a business need to build a system
Examples of business needs:
Supporting a new marketing campaign
Reaching out to a new type of customer
Improving interactions with suppliers.
PROJECT IDENTIFICATION
Where do project ideas come from?
Pain related needs:
A drop in market share
Poor customer service levels
Unacceptable product defect rates
Increased competition
New business initiatives/strategies e.g., company mergers
When the organization identifies unique and competitive ways of using IT.
WHAT PAIN POINTS AT UDSM COULD BE
SOLVED BY HAVING A NEW INFORMATION
SYSTEM? (GROUPS OF 2 TO 3)
Menti slide
WHAT NEW TECHNOLOGIES COULD BE
INTRODUCED AT UDSM TO IMPROVE OR
SOLVE PROBLEMS? (GROUPS OF 2 TO 3)
Menti slide
SYSTEM REQUEST
A system request is a document that
describes the business reasons for
building a system and the value that the
system is expected to provide.
Five elements in a system request:
Project sponsor
Business need
Business requirements
Business value
Special issues
PROJECT SPONSOR
The person who initiates the project and who will serve as the primary
contact for the project on the business side.
Examples:
IT managers
Marketing managers
Several member of finance department
CEO
BUSINESS NEED
The business-related reason for initiating the system or the
project.
Examples:
Increase sales
Improve market share
Improve access to information
Improve customer service
etc.
BUSINESS REQUIREMENTS
The business capabilities that the system will provide
Examples:
Provide online access to information
Produce management reports
Capture customer demographic information.
Include online user support.
BUSINESS VALUE
Describes the benefits that the organization should expect from the
system.
Examples:
3% increase in sales
1% increase in market share
$150,000 savings from removal of existing system
$200,000 cost savings from decreased supply costs
SPECIAL ISSUES
Issues that are relevant to the implementation of the system that need to
be known by the approval committee.
Example:
Government-mandated deadlines (e.g., integration with EFD machines)
System needed in time for the Christmas holiday season.
SYSTEM REQUEST
The committee reviews the system request and makes an initial
determination, based on the information provided, of whether to
investigate the proposed project or not.
If so, the next step is to conduct a feasibility analysis.
Requirements
Feasibility elicitation and
study
analy sis
Requirements
specification
Feasibility Requirements
THE
report validation REQUIREME
NTS
System
models
ENGINEERIN
G PROCESS
User and system
requirements
Requirements
document
FEASIBILITY ANALYSIS
A feasibility study decides whether or not the proposed system is
worthwhile.
Feasibility analysis also identifies the important risks associated with the
project that must be managed if the project is approved
Three areas are assessed:
o Technical feasibility
o Economic feasibility
o Organizational feasibility
TECHNICAL
FEASIBILITY
TECHNICAL FEASIBILITY
The first technique in the feasibility analysis.
Technical feasibility of the project is the extent to which the system
can be successfully designed, developed, and installed by the IT
group
Strives to answer the question “Can we build it?”.
TECHNICAL FEASIBILITY
ANALYSIS
Possible technical risks that need to be assessed:
Familiarity with application
Familiarity with technology
Project size
Compatibility
FAMILIARITY WITH
APPLICATION
Analysts unfamiliar with the business application area
Misunderstanding the users
Missing opportunities for improvement
The risks increase when users are less familiar with an application area
New systems is riskier than extensions to an existing system
FAMILIARITY WITH THE
TECHNOLOGY
A system using a technology that has not been used before.
Problems or Delays -- Need to learn to use technology
Risk increases dramatically when the technology itself is new.
Less familiarity generates more risk.
PROJECT SIZE
Measured as:
Number of people on development team
Length of time it will take to complete the project
Number of distinct features (modules) in the system
Larger projects present more risk
Important system requirements to be overlooked or misunderstood
COMPATIBILITY
Systems are rarely built in vacuum.
Organizations have numerous systems already in place
Need integration of new technology and applications with existing
environment
Data from existing systems
Communication infrastructure
New systems have little value if they do not integrate / take advantage of
existing systems. E.g., A new Customer Relationship Management (CRM)
system has little value if it does not integrate with:
Customer data
User marketing applications
Customer service systems.
HOW TO CONDUCT TECHNICAL
FEASIBILITY ANALYSIS
Compare the project under consideration with prior projects undertaken by
the organization
Consult with experienced IT professionals in the organization or with
external IT consultants
The assessment of a project’s technical feasibility is not a one-time thing,
can be done overtime as more information on the project comes to light
CLASS ACTIVITY
Describe a “risky” project in terms of technical feasibility.
ECONO
MIC
FEASIBIL
ITY
ECONOMIC FEASIBILITY
Economic feasibility is determined by identifying costs and benefits
associated with the system, assigning values to them, calculating future
cash flows, and measuring the financial worthiness of the project
Economic feasibility analysis( or cost-benefit analysis) attempts to answer
the question “Should we build the system?”
Identifies financial opportunities and risks
STEPS TO CONDUCT AN
ECONOMIC FEASIBILITY ANALYSIS
Identify Costs
Assign Value to Costs and Benefits
Determine Cash Flow
Assess Project’s Economic Value
Return on Investment(ROI)
Break-Even Point(BEP)
Net Present Value(NPV)
IDENTIFY COSTS AND
BENEFITS
To identify the kinds of costs and benefits the system will have and list
them along the left-hand column of a spreadsheet.
The costs and benefits can be broken down into four categories:
Development costs
Operational costs
Tangible benefits
Intangibles benefits
DEVELOPMENT COSTS
Development costs are those tangible expenses that are incurred during
the creation of the system, such as:
Salaries for the project team
Hardware and software expenses
Consultant fees,
Training,
Office space and equipment.
Development costs are usually thought of as one-time costs.
OPERATIONAL COSTS
Operational costs are those tangible costs that are required to operate the
system, such as:
the salaries for operations staff
Software licensing fees
Equipment upgrades
Communications charges.
Operational costs are usually thought of as ongoing costs..
TANGIBLE BENEFITS
Tangible benefits include revenue that the system enables the organization
to collect, such as:
Increased sales
Cost savings
reduction in needed staff, lower salary costs
reduction in required inventory levels, lead to lower inventory costs
INTANGIBLE BENEFITS
Intangible costs and benefits are more difficult to incorporate into the
economic feasibility analysis because they are based on intuition and belief
rather than on “hard numbers”
Examples:
Higher quality products
Improved customer service
Improved company image
ASSIGN VALUE TO COSTS
AND BENEFITS
This task is usually difficult, you have to do the best you can to come up
with reasonable numbers for all of the costs and benefits
Costs and Benefits that have not happened yet
Prediction that is realistic
Only then can the approval committee make an informed decision about
whether or not to move ahead with the project
ASSIGN VALUE TO COSTS
AND BENEFITS
The most effective strategy for estimating costs and benefits is to rely on
the people who have the best understanding of them.
Costs and Benefits related to technology
Company’s IT group
External consultants
Costs and Benefits related to business (Sales projections)
Business users
Past Projects, Industry Reports
ASSIGN VALUE TO COSTS
AND BENEFITS
If predicting a specific value for a cost or benefit is proving difficult, it may
be useful to estimate a range of values for the cost or benefit and then
assign a likelihood (probability) estimate to each value.
What about Intangible benefits and costs?
List without assigning value
List with assigning value
Example: System claims to improve customer service which lead to a decrease on the
number of customer complaints by 10% each year over three years which costs about
$200,000 spent on phone charges and phone operators.
WHAT ARE THE POSSIBLE
BENEFITS?
Food delivery app (E.g., Piki, Uber Eats, FoodSasa)
Watsapp
ASSESSMENT MEASURES
Cash flow analysis
Return on Investment
Break-Even point
Discounted Cash flow technique
CASH FLOW ANALYSIS
IT projects commonly involve an initial investment that
produces a stream of benefits over time, along with some
ongoing support costs
Cash flows, both inflows and outflows, are estimated over
some future period.
Cash flows are evaluated using several techniques to judge
whether the projected benefits justify incurring the costs
Year 0 Year 1 Year 2 Year 3 Total
Total Benefits 45,000 50,000 57,000 152,000
Total Costs 100,000 10,000 12,000 16,000 138,000
Net Benefits (Total Benefits – Total Costs) 100,000 35,000 38,000 41,000 14,000
Cumulative Net Cash Flow (Benefits Vs -100,000 -65,000 -27,000 14,000
Initial investment)
CASH FLOW ANALYSIS:
EXAMPLE
RETURN ON INVESTMENT
The return on investment (ROI) is a calculation that measures
the average rate of return earned on the money invested in
the project.
ROI is a simple calculation that divides the project’s net
benefits (total benefits - total costs) by the total costs.
ROI FORMULA
Year 0 Year 1 Year 2 Year 3 Total
Total Benefits 45,000 50,000 57,000 152,000
Total Costs 100,000 10,000 12,000 16,000 138,000
Net Benefits (Total Benefits – Total Costs) 100,000 35,000 38,000 41,000 14,000
Cumulative Net Cash Flow -100,000 -65,000 -27,000 14,000
A high ROI suggests that the project’s benefits far outweigh
the project’s cost
BREAK-EVEN POINT
The break-even point (also called the payback method) is
defined as the number of years it takes a firm to recover
its original investment in the project from net cash flows.
Give an indication of the speed at which the project generates
cash returns.
Projects that produce higher returns early in the project’s life
are thought to be less risky.
BEP FORMULA
Year 0 Year 1 Year 2 Year 3 Total
Total Benefits 45,000 50,000 57,000 152,000
Total Costs 100,000 10,000 12,000 16,000 138,000
Net Benefits (Total Benefits – Total Costs) 100,000 35,000 38,000 41,000 14,000
Cumulative Net Cash Flow -100,000 -65,000 -27,000 14,000
DISCOUNTED CASH FLOW
The simple cash flow projection shown in before and the return
on investment and break-even point calculations all share the
weakness of not recognizing the time value of money.
A dollar in Year 3 of the project is considered to be exactly
equivalent to a dollar received in Year 1.
Discounted cash flows are used to compare the present
value of all cash inflows and outflows for the project in today’s
dollar terms.
PRESENT VALUE FORMULA
Rate of return
n is the year in which the cash flow occurs.
If you have a friend who owes you $100 today, but instead gives you that
$100 in three years—it’s a loss!
NET PRESENT VALUE
The NPV is simply the difference between the total present
value of the benefits and the total present value of the costs.
As long as the NPV is greater than zero, the project is
considered economically acceptable
NPV FORMULA
ORGANIZATION
AL FEASIBILITY
ORGANIZATIONAL
FEASIBILITY
In essence, an organizational feasibility analysis attempts to
answer the question “If we build it, will they come?”
Strategic alignment is the fit between the project and
business strategy—the greater the alignment, the less risky
the project will be, from an organizational feasibility
perspective.
Many projects fail if the IT department alone initiates them and
there is little or no alignment with business unit or
organizational strategies.
ORGANIZATIONAL
FEASIBILITY
Stakeholder analysis is another method for assessing
organizational feasibility.
A stakeholder is a person, group, or organization that can
affect (or can be affected by) a new system
Important stakeholders are:
The champion
Organizational management
System users
THE CHAMPION
The champion is a high-level executive and is usually, but not
always, the project sponsor who created the system request
Roles:
Allocates time and resources
Promotes the project
More than one champion is preferable because if the champion
leaves the organization, the support could leave as well
THE CHAMPION
How to enhance organizational feasibility:
Make a presentation about the objectives of the project
project and the proposed benefits to those executives who
will benefit directly from the system.
Create a prototype of the system to demonstrate its
potential value
ORGANIZATIONAL
MANAGEMENT
Provides management support to the project.
Know about the project
Budget enough money for the project
Encourage users to accept and use the system
ORGANIZATIONAL
MANAGEMENT
How to enhance organizational feasibility:
Make a presentation to management about the objectives of
the project and the proposed benefits
Market the benefits of the system
Encourage the champion to talk about the project with his or
her peers.
SYSTEM USERS
Those who ultimately will use the system once it has been
installed in the organization.
Too often, the project team meets with users at the beginning
of a project and then disappears until after the system is
created.
User participation should be promoted throughout the
development process to make sure that the final system will
be accepted
SYSTEM USERS
Assign users official roles on the project team.
Assign users specific tasks to perform, with clear deadlines
Ask for feedback from users regularly (e.g., during weekly
meetings)
ORGANIZATIONAL
FEASIBILITY ANALYSIS
FEASIBILITY ANALYSIS
DOCUMENT
Consists of all the three parts:
Technical feasibility
Economic feasibility
Organizational feasibility
QUESTIONS?
ASSIGNMENT
Check LMS to see which group you belong to
Sit together and think about a system that you want to develop/work with
in the course. The system should be something that preferably affects
university students but any ideas are welcome. (Be creative, but also go for
simplicity!)
Write a brief description of the system and what it is meant to do
Create a system request
Perform a feasibility analysis and create a feasibility analysis document
LMS
FORUM –
REPLY
BEFORE
THURSD
AY 18TH
GROUPS ON MOODLE
How to access groups
GROUPS ON MOODLE –
MESSAGING
